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Bloomberg LP unveils new tool to measure the risk of ‘un-burnable carbon’

Bloomberg LP unveils new tool to measure the risk of ‘un-burnable carbon’

Date

04 December 2013

LONDON: Bloomberg LP, a member of The Climate Group, has introduced a tool to show potential economic impacts on companies that are under carbon constraints, which will help spur the world’s top power companies to assess the financial risks of climate change and the opportunities of transitioning to a low carbon economy.

For the first time, Bloomberg’s new Carbon Risk Valuation Tool will allow investors to measure how climate policies and associated risks could impact the earnings and stock prices of companies, particularly those in traditional fuel industries that are under carbon pollution constraints.

The tool quantifies material risks of stranded assets in order to help clients more efficiently meet established and emerging disclosure requirements and standards. It offers five scenarios, such as annual decreases in oil prices—as well as the ability to adapt assumptions--to identify the ways stranded asset risks may manifest in the future.

As new data and methodologies become available, Bloomberg aims to expand the tool beyond carbon, to other environmental risks that could also strand assets.

The tool will spotlight ‘stranded assets’ to influential gloabl investors--a critical discussion which is long overdue. Back in August, a survey based on responses from investors with collective assets of over US$14 trillion, revealed the majority view climate change as a material risk which influences their investment activities.

Then in October, a group of 70 global investors that manage more than US$3 trillion worth of collective assets, launched the first-ever joint effort to spur the world’s top power companies to assess the financial risks of climate change. The investors sent letters to 45 of the world's biggest oil, gas, coal and electric power companies in response to Carbon Tracker’s 2013 report Unburnable Carbon, which found that in 2012 alone, the 200 biggest publicly traded fossil fuel companies collectively spent around US$675 billion on new reserves which could never be used and would become worthless, or ‘stranded assets’.